FY 2016 Budget Request by Program

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Division of Enforcement 60

Office of Compliance Inspections and Examinations 66

Division of Corporation Finance 73

Division of Trading and Markets 75

Division of Investment Management 83

Division of Economic and Risk Analysis 89

Office of the General Counsel 94

Other Program Offices 97

Office of the Chief Accountant 98

Office of Investor Education and Advocacy 100

Office of International Affairs 102

Office of Administrative Law Judges 106

Office of the Investor Advocate 107

Office of Credit Ratings 109

Office of Municipal Securities 112

Agency Direction and Administrative Support 114

Agency Direction 115

Office of the Chief Operating Officer 118

Office of the Ethics Counsel 129

Office of Minority and Women Inclusion 131

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Division of Enforcement

(DOLLARS IN THOUSANDS)

FY 2014

Actual EstimateFY 2015 RequestFY 2016

FTE: Headquarters 465 499 527

Regions 801 844 883

Total FTE 1,266 1,343 1,410

Cost: Salaries and Benefits $ 282,114 $ 314,798 $ 343,578

Non-Personnel Expenses 173,663 179,906 184,651

Total Costs $ 455,777 $ 494,704 $ 528,229

FY 2016 FTE BY SEC STRATEGIC GOAL

Goal 1 Goal 2 Goal 3 Goal 4

Establish an Effective Regulatory Environment

Foster and Enforce Compliance with Federal Securities Laws

Facilitate Access To Information Investors Need

Align and Manage Resources

14 1,340 14 42

The SEC relies upon a vigorous enforcement program in order to protect investors and instill confidence in the integrity of the markets. The Division of Enforcement supports this mandate by investigating potential violations of the securities laws, and, when appropriate, filing civil charges against wrongdoers in Federal district court or in administrative proceedings. Among other things, the Division can obtain monetary penalties that punish wrongdoers and deter others from committing similar violations; disgorgement of ill-gotten gains that, along with monetary penalties, may be returned to harmed investors; injunctions that prevent wrongdoers from committing additional violations of the securities laws; and bars that prevent wrongdoers from working in the industry where they could otherwise victimize again.

The Division continues to achieve significant results. In the fiscal year that ended September 2014, the SEC filed a record 755 enforcement actions. The SEC also obtained orders for more than $4.16 billion in disgorgement and penalties in FY 2014, which is also a record.

In FY 2014, the Division filed a number of first-of-their-kind actions. The SEC filed the first series of cases involving violations of the market access rule, the first action enforcing the “pay to play” rule for investment advisers, the first action against a private equity firm relating to its allocation of fees

and expenses, and the first anti-retaliation case to protect a whistleblower who reported improper trading activity. The SEC also is using its penalty authority to ensure that its actions have the appropriate deterrent effect The SEC obtained the largest penalties ever (by a factor of forty) for net capital violations. The Commission also obtained the largest penalty to date against an alternative trading system, and separately obtained the largest penalty ever against individuals in a Foreign Corrupt Practices Act (FCPA) case.

Notwithstanding these results, the Division faces continued challenges. Accordingly, the Division is requesting 93 additional positions in FY 2016. As described in more detail below, the Division needs resources in each of its three mission-critical functions. First, to effectively identify misconduct, the Division needs sophisticated technology tools to collect and analyze market data, as well as staff to conduct investigations and litigation in critical areas. Second, to maintain an effective investigative function, the Division needs to continue devoting resources to high-priority areas such as accounting and reporting fraud, market structure, and other areas. Third, to maximize the deterrent impact of enforcement actions, the Division needs additional staff to litigate the growing number of contested cases.

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Challenges Facing the Enforcement Program

The Division of Enforcement faces a number of key challenges to its ability to effectively and efficiently prosecute violations of the securities laws. Some of these are discussed below. Fragmented and complex equity markets pose unique challenges to Enforcement: In recent years, the securities markets have grown increasingly complex and opaque. There has been a proliferation in sophisticated tools and trading methods used in the markets, including the use of high frequency trading, complex algorithmic trading, and off-exchange trading venues. Unlawful trading strategies – such as “layering,” in which a trader sends and then cancels a series of orders that the trader does not intend to have executed to manipulate the price of a security – are becoming increasingly complex and more difficult to identify. The Division is committed to uncovering and charging violations of the law by all manner of market participants in these new trading venues and elsewhere. Accordingly, the Division needs sufficient analytical tools, as well as staff to analyze data from these tools, to ensure it keeps pace with this constantly evolving environment.

The Division is filing more cases and conducting more trials: The Division’s caseload is growing rapidly. In FY 2014, the SEC conducted 30 trials and hearings, almost twice the number of the previous year. As its litigation caseload increases, the Division is incurring greater expenses for experts, consultants, e-discovery, data loading, and contractor support. Although the volume will vary, the Division expects the upward trends in litigation activity and costs to continue, and needs sufficient resources to ensure it can continue to effectively prosecute violations of Federal securities laws and hold violators accountable.

Advanced technological capabilities are essential for effective investigations: Each month, the Division receives seven terabytes of electronic data in its investigations. The sheer volume of digital evidence produced by the SEC in its investigations requires ever-greater storage and processing powers – not to mention the additional time needed for investigators to review that mass of information. In addition, in today’s society, fraudsters have an ever-expanding array of technological options to conceal misconduct and encrypt the evidence of their wrongdoing. The Division needs additional resources to effectively monitor this changing landscape.

The Division prosecutes resource-intensive and highly technical areas of misconduct: Certain high-priority areas of misconduct

can be highly technical and particularly resource-intensive. This includes financial reporting matters as well as market structure matters, including actions against securities exchanges and alternative trading systems. Having adequate resources to address these areas is vital to both uncovering the misconduct and doing so in a timely manner. For example, the Division has created a Financial Reporting and Audit Task Force, focused on improving its ability to detect and prevent financial statement and accounting fraud. Indeed, the number of financial reporting and issuer disclosure brought in FY 2014 cases rose by almost 50 percent from the previous fiscal year as the SEC increased its focus on this area. However, these types of investigations often demand a substantial commitment of resources and staff time. Absent additional funds, those resources will have to be drawn from other priority areas.

The Division’s whistleblower office takes in thousands of tips per year, generating a fresh stream of case leads that deserve investigation: In FY 2014, the Division received approximately 15,000 tips, complaints, and referrals, and approximately 3,600 of these were from whistleblowers. Whistleblowers can often provide high-quality information that allows the Division to more quickly and efficiently detect and investigate alleged violations of the law. Staff from the Division’s Office of Market Intelligence (OMI) closely examine each tip to identify those that are sufficiently specific, credible, and timely to warrant the additional allocation of SEC resources. Individuals who voluntarily provide the SEC with original information that leads to a successful enforcement action resulting in monetary sanctions greater than $1 million may be eligible to receive an award equal to 10-30 percent of the monies collected. The Division believes momentum for this program is building. In FY 2014, the Office of the Whistleblower received more tips than ever before, made the largest number of awards, announced its largest award ever of $30 million to an individual, and returned over 2,700 phone calls from members of the public. The Division anticipates that these significant payments will further incentivize whistleblowers to come forward and submit high quality tips. In turn, the Division expects to initiate more investigations and to bring enforcement actions against violators where it would otherwise have not had sufficient information to do so. The Division’s policy of requiring admissions of wrongdoing in certain cases may require additional resources: In FY 2013, the SEC changed its long-standing settlement policy, and now requires admissions of misconduct in a discrete category of cases where heightened accountability and acceptance

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of responsibility by a defendant are appropriate and in the public interest. By the end of FY 2014, the SEC had obtained admissions in over a dozen cases, and more are in the pipeline. Where admissions or other acknowledgement of wrongdoing are critical, the SEC will insist on them and, should defendants refuse, will litigate those cases. Because litigation generally requires a substantial amount of staff time, it will take additional resources to follow through on this commitment to litigate such cases in any instances in which the SEC’s demands for admissions of wrongdoing are not met.

New Commission rules must be carefully monitored and any misconduct must be immediately and aggressively addressed: As the Commission promulgates new rules, including under the Dodd-Frank Act and JOBS Act, there are additional opportunities for misconduct. The Division is committed to carefully monitoring this landscape, and moving swiftly against those who violate the new rules. For example, the Jumpstart Our Business Startups (JOBS) Act includes a new rule that allows for broader solicitation of certain types of investments To monitor this new area of the market, the Division created the JOBS Act Task Force, which has created risk-based initiatives to identify parties that are not adhering to the new regulations, including issues related to inadequate efforts to verify accreditation. The Division requires additional resources to devote appropriate attention to this new field, while also maintaining its focus on existing priorities. Strong enforcement in these new markets is essential.

The Division is committed to charging wrongdoing across the spectrum of securities laws violations: The Division is tasked with enforcing a wide variety of statutes and rules, some applicable only to certain types of firms such as broker-dealers or investment advisers, and some, such as antifraud provisions, that apply broadly to all market participants. The Division requires additional resources in order to properly address this wide range of violations and violators.

Proactive Enforcement Efforts

To achieve its goals, the Division of Enforcement continues to implement a range of initiatives designed to increase its ability to identify hidden or emerging threats to the markets, act quickly to halt misconduct and minimize investor harm, and maximize deterrence. These initiatives include:

• Addressing Violations Through Sweeps and Streamlined Investigations: The Division is committed to pursuing violations of varying type and severity, including those

that do not require a finding of an intent to violate the law, yet that are important to maintaining the integrity of the markets. For example, in FY 2014, the Division used quantitative data analytics to root out and file charges against 34 individuals who had repeatedly violated securities laws by not promptly reporting information about their holdings and transactions in company stock. • Using Big Data to Detect and Investigate Violations: The Division is increasingly leveraging big data to detect and investigate misconduct. As an example, the staff has developed new analytical tools to detect suspicious trading patterns to assist in building insider trading cases. In addition, the Financial Reporting and Audit Task Force is partnering with the Division of Economic and Risk Analysis to refine a tool that will enable the staff to detect anomalous results (and thus potential case leads) in large amounts of public company filing data. Moreover, the recently established Center for Risk and Quantitative Analytics coordinates risk identification, risk assessment, and data analytic activities, with the goals of proactively identifying threats to investors and bringing cutting-edge analysis to bear on the Division’s work. The Division expects that these improved information processing and analysis capabilities will yield a steady stream of additional case leads. The Division accordingly needs commensurate technology tools and staff to review and analyze those leads. • Continued Focus on Market Structure, Exchanges, and

Broker-Dealers: As sophisticated trading technologies and trading venues have proliferated, Enforcement is focused on keeping pace with an ever-evolving marketplace. As an example, during FY 2014, the Commission filed significant cases against market participants, such as exchanges, ATSs, and broker-dealers, for failures in controls, failures to safeguard customer information, net capital violations, and manipulative trading.

• Advanced Relational Trading Enforcement Metrics Investigation System (ARTEMIS): This initiative, led by the Division’s Market Abuse Unit, focuses on the analysis of suspicious trading patterns and relationships among multiple traders using the Division’s electronic database of over 6 billion electronic equities and options trading records. It seeks to generate high-quality leads for new investigations, and to automate and improve analyses commonly run in existing investigations.

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• Operation Broken Gate: The Division is focused on holding accountable gatekeepers who fail to carry out their duties and responsibilities consistent with professional standards, and this initiative focuses on identifying wrongdoing by auditors. More generally, the staff is also looking at the conduct of attorneys and other gatekeepers who have special duties and responsibilities to ensure that the interests of investors are safeguarded.

• Compliance Program Initiative: Working closely with the SEC’s National Examination Program, Enforcement is coordinating efforts to identify and bring cases against registered investment advisers who lack the type of effective compliance programs and procedures that are required under the law. This project has resulted in 11 enforcement actions to date. These and future enforcement actions will help to implement the prophylactic investor-protection measures found in the Investment Advisers Act.

• Microcap Fraud Task Force: The Division is continuing its focus on fraud in the promotion and manipulation of stock in thinly traded “penny stock” companies with low capitalization – focusing especially on recidivists and gate-keepers who enable such schemes, including attorneys, auditors, broker-dealers, transfer agents, promoters, and others. Because of the frequency of campaigns to spread false information about microcap companies, and the fact that they are often entities with sparse track records, among other reasons, these issuers pose special risks, particularly to less sophisticated retail investors.

• Aberrational Performance Inquiry: The Division continues to charge hedge fund advisers who post suspicious performance returns. Working closely with others in the SEC, including DERA, OCIE, and OIA, Enforcement’s Asset Management Unit develops risk-based analytics to examine performance data of thousands of hedge fund advisers and identify candidates appropriate for examination or investigation.

• Industry Experts: The Division continues to leverage the expertise of various experts hired to give practical insights into industry practices. Each expert is affiliated with one of the Division’s specialized units, where he or she advises unit staff on particular investigations and helps develop forward-looking risk-based initiatives. In addition, the experts are available to other Division staff as appropriate for consultation on investigations.

• Municipal Securities and Public Pensions: The Division’s Municipal Securities and Public Pensions Unit is focused on bringing ground-breaking enforcement actions against cities, states, other public issuers, and their underwriters for misrepresentations in public offerings, inadequate risk disclosures, ignoring pay-to-play restrictions, and other violations. As an example, in FY 2014, the Division launched the Municipalities Continuing Disclosure Cooperation (MCDC) Initiative, which encourages and rewards self-reporting of certain violations by municipal issuers and underwriters. The Commission has already brought its first action arising from this Initiative.

• Communication and Coordination with Other Divisions, Regulators and Criminal Authorities: The Division plans to continue coordination with other SEC divisions, as well as with other securities regulators and appropriate criminal authorities, to detect securities violations and prosecute them accordingly. As an example, we recently launched the Broker-Dealer Task Force to promote coordination among OMI, OCIE, TM, OIEA, FINRA, and state regulators. This led to greater focus on issues and practices within the broker-dealer community and development of national initiatives for investigations. The Division expects that such coordination initiatives will continue to generate investigative leads well through FY 2016, and needs sufficient staffing to analyze and pursue these leads.

Plans for Additional Positions

To enable the Division to meet the challenges of a rapidly growing case load, and to maintain an effective investigative capacity and deterrent presence, the Division must be adequately staffed to address increasingly complex financial products and transactions, handle the increasing size and complexity of the securities markets, identify emerging threats and take prompt action to halt violations, and recover funds for the benefit of harmed investors. For FY 2016, the Division is requesting 93 additional positions. These additional resources will support the Enforcement program’s current and future initiatives by, among other things:

• hiring experienced forensic accountants, attorneys, industry experts, paraprofessionals, and information technology and support staff, to promptly detect, prioritize, and investigate areas appropriate for enhanced enforcement efforts;

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• adding experienced trial attorneys to prosecute a growing number of highly-complex enforcement actions, and hiring paraprofessional and administrative support staff to assist the attorneys in performing these functions;

• expanding Enforcement’s data analytics expertise to assist in the implementation of big data projects; state-of-the-art investigative tools, such as eDiscovery and knowledge management; and improved forensic capabilities; and • bolstering staffing for intelligence functions including the

collection, analysis, triage, referral, monitoring, and follow-through on the thousands of tips, complaints and referrals that the agency receives each year.

The Division will use the additional requested positions to support its three core functions – intelligence analysis, investigation, and litigation – in the following ways:

Processing and prioritizing intelligence is key to Enforcement’s efforts: A strong intelligence analysis capacity is at the core of an effective enforcement program. The Division receives and analyzes approximately 15,000 tips, complaints, and referrals a year, and expects these responsibilities for intelligence analysis will only expand in the coming years. Additionally, the Commission will shortly begin receiving security-based swaps (SBS) data, as mandated by the Dodd-Frank Act. As a result, the Division needs to continue to bolster its capabilities to efficiently process, vet, and analyze the information so that the most promising leads can be handed off to investigative staff. The Division also requires additional staff to conduct early-stage investigations known as “matters under inquiry” that often arise from these tips, complaints, and referrals. Accordingly, the Division is requesting 20 new positions in FY 2016 to continue to develop its data analytics function, its OMI review function, and also the staff to whom the most promising tips, complaints, and referrals are sent for further investigation.

Enforcement must act swiftly and decisively in investigating misconduct: The Enforcement program requires increased staffing to promptly detect complex frauds and other difficult-to-detect misconduct, whether it occurs at hedge funds, broker-dealers, or “boiler rooms”; respond to misconduct in the changing equity markets relating to algorithmic trading and “dark pools”; address large-scale insider trading and stock manipulation; and generally keep pace with a rapidly evolving industry. Enforcement is seeking 50 new positions in FY 2016 to reinforce the investigations function.

These new positions will help the Division continue progress on existing investigations and handle its increasing case load, while quickly investigating and bringing emergency actions in cases where investors’ money may dissipate if immediate action is not taken. With the requested new staff in FY 2016, Enforcement expects to apply additional resources to the investigations posing the highest risk to investors and the marketplace. The Division’s ability to litigate its increased caseload is mission critical: The Division handles an expansive and sophisticated docket of litigation and trials, often against well-funded adversaries. Ensuring that appropriate resources are devoted to these cases after they are filed is critical to the SEC’s investor-protection efforts. Successful litigation deters wrongdoing, sanctions those responsible for misconduct, and can result in relief for victims. In addition to trial victories, the Division’s litigation efforts help it obtain strong settlements by making clear that the Division will go as far as required in order to obtain appropriate relief. The complex and document-intensive types of cases brought by the SEC require substantial investments in staff time when litigating. In recent years, an increasing percentage of enforcement actions have been filed as contested matters, as opposed to being fully settled at the outset. Enforcement requests 23 new positions in FY 2016 to reinforce its litigation operations nationwide. This increased allocation will enable the SEC to follow through on its commitment to litigate any case where it believes admissions of wrongdoing are appropriate under its new policy, if necessary.

The Division must continue to invest in technology: The Enforcement program must continue to invest in new technologies that make our investigative and litigation staff more efficient and effective – while being mindful of overall costs and the need to keep pace with the market:

• Analytical toolsets and analysis platforms: The Division requires new analytical tools and analysis platforms to implement many of its risk-based initiatives.

• eDiscovery: The Division must continue to invest in modernizing its eDiscovery technologies and toolsets. The Division’s investigations deal with expanding amounts of data and new techniques and capabilities are needed to collect, search, categorize, and review relevant materials. These investments will enable staff to uncover more needles, in larger haystacks, in a shorter period of time.

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• Access to analytical data feeds and information sources: Robust enforcement also requires access to real-time analytical data feeds covering a wide spectrum of financial, trading, accounting, legal, and market activity and information. It is critical that the Division receive sufficient funds to acquire these data feeds and information sources. • Blue Sheets modernization: To better support the Division’s

investigations our Blue Sheets system, which is used to analyze stock transactions and which is now more than a decade old, must be modernized. In recent years the system has struggled to keep pace with changes in the market – especially the vast increase in trade data caused by algorithmic trading – while meeting the increased demand for quantitative data and analysis to support our investigations. Modernizing the Blue Sheets system will address these limitations, and provide a robust capability to support complex investigations and feed other analytical tools and analysis platforms.

• Knowledge management: The Division will continue to enhance its new intranet knowledge management portal that provides staff with an easy to navigate, fully searchable repository of content and standard templates. • Document management: Enforcement is leading the adoption of a document management technology that will greatly simplify the storage and sharing of electronic documents throughout the national program. A modern document management system will give the staff immediate access to a comprehensive, secure repository of pleadings, correspondence, and other case files and documents. Many of these technologies will have benefits for divisions and offices across the SEC. Investments made into eDiscovery, knowledge management, document management, and analytical tools and analysis platforms are readily shared agency-wide, including with OCIE, DERA, OGC, IM, and OIG. The Division also will continue working closely with other Federal regulators and law enforcement to share investigative techniques, technologies, and capabilities when appropriate.

WORKLOAD DATA Activity FY 2014 Actual FY 2015 Estimate FY 2016 Request Intelligence Analysis

Investor Tips and Complaints 15,472 16,000 16,000

Matters Under Inquiry (MUIs) Opened 1,009 1,050 1,100

FTE 279 295 310

Investigations

Opened 995 1,050 1,100

Ongoing at End of Year1 _1,612 _1,625 _1,650

FTE 696 739 775

Proceedings

Administrative:

Opened 610 615 625

Pending at End of Year 714 715 715

Civil Litigation:

Opened 145 150 160

Pending at End of Year 1,767 1,750 1,750

FTE 291 309 325

Total FTE 1,266 1,343 1,410

1 _{“Ongoing” investigations are those in which the investigation remains active. It excludes those that are open solely because they are in litigation; those in which the SEC} is seeking to collect assets and funds to satisfy outstanding judgments and debts owed to the SEC; those in which the SEC is distributing funds to harmed investors; and those that are in some other post-litigation activity. “Ongoing” investigations also exclude those that are in the process of being closed.

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Office of Compliance Inspections and Examinations

(DOLLARS IN THOUSANDS) FY 2014 Actual FY 2015 Estimate FY 2016 Request FTE: Headquarters 181 211 242 Regions 721 753 864 Total FTE 902 964 1106

Total Costs $ 277,689 $ 305,034 $ 349,612

Establish an Effective

Regulatory Environment Foster and Enforce Compliance with Federal Securities Laws Facilitate Access To Information Investors Need Align and Manage Resources

11 1,051 11 33

The Office of Compliance Inspections and Examinations (OCIE) conducts the SEC’s National Examination program. Examinations are designed to: (1) improve compliance; (2) prevent and detect fraud; (3) identify and monitor risk; and (4) inform regulatory policy. To this end, the results of OCIE’s examinations are used by the Chair and Commissioners to shape policy and strategy, by the Divisions of Investment Management, Trading and Markets, and Corporation Finance to inform rulemaking initiatives, by the Division of Economic and Risk Analysis to facilitate various risk initiatives, and by the Division of Enforcement to pursue misconduct.

In response to an ever-changing and evolving regulatory environment, the examination program has implemented a continuous improvement process across several critical areas, including people, strategy, and technology. The program intends to use the additional resources requested in FY 2016 to continue the implementation of key improvement initiatives while also addressing critical market, industry, and technology developments impacting the examination program.

The additional resources being requested are essential for OCIE to meet its objectives and fulfill the agency’s mission. In particular, resources are needed to: (1) lessen the impact of the disparity between the number of exam staff and the growing number and complexity of registered firms, particularly in the

investment management industry and the newly registered Municipal Advisors; (2) continue implementation of certain legislative changes, including provisions of the Dodd-Frank and JOBS Acts; (3) enhance and expand quantitative and data analytic efforts; and, (4) more effectively target risk, and monitor and examine market participants. OCIE will also enhance training and expertise of examiners in data analysis, fraud detection and prevention, technology, new products and trading strategies, and other critical issues. Additionally, in FY 2016, OCIE will continue its efforts to promote industry compliance efforts through initiatives such as the Compliance Outreach program.

OCIE requests an additional 225 positions to accomplish these goals. Overall, OCIE’s risk-based program is designed to focus the SEC’s resources on those firms and practices that pose the greatest potential risk of securities law violations that can harm investors and the markets, and those entities that introduce significant financial risks to the market. The following summarizes key observations, issues, and challenges impacting the SEC’s examination program, all of which have influenced OCIE’s staffing request for FY 2016.

The breadth and complexity of the SEC-regulated securities markets is vast and growing: Given the examination program’s current resources, it is extremely challenging for OCIE to consistently

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provide the Commission and our capital markets with reliable, timely, and actionable information to inform policymaking initiatives and enforcement activity. OCIE anticipates that at the beginning of FY 2016 it will oversee more than 25,000 market participants, including nearly 12,000 investment advisers with more than $65 trillion in assets under management, more than 800 investment company complexes managing over 10,500 mutual funds and Exchange Traded Funds (ETFs), approximately 4,500 broker-dealers with more than 160,000 branch offices, 18 national securities exchanges, and approximately 450 transfer agents. OCIE will also oversee at least eight entities that provide clearing agency functions, four of which have been deemed systemically important, as well as the PCAOB, MSRB and FINRA. Additionally, although the Dodd-Frank Act generally shifted the responsibility for examining investment advisers with less than $100 million in regulatory assets under management to the states, it expanded the SEC’s jurisdiction by adding a significant number of potentially large and complex entities, such as municipal advisors, private fund advisers, and securities-based swap participants. Overall, the size of the SEC regulated community continues to dwarfs the size of the current exam program (currently close to 900 staff).

Exam coverage of the securities markets remains limited: The staff examined approximately ten percent of registered advisers in FY 2014 and roughly 40 percent of advisers have never been examined. Significant additional resources are critical to the exam program in order to improve the examination coverage of investment advisers. With respect to broker-dealers, the program is supplemented by SRO oversight, and together the SEC and SROs examined approximately 50 percent of broker-dealers in some form during FY 2014. However, regulators are examining well below one percent of the approximately 160,000 branch offices each year.

Increases in the regulatory population and complex new products and lines of business complicate oversight: The largest increase in registered entities has occurred among investment advisers (IAs). A decade ago, there were approximately 8,500 advisers managing $24 trillion in assets. OCIE projects that these figures will grow to 12,000 advisers managing $65 trillion in assets in FY 2016. But the increase in the number of advisers and the

amount of assets are not the only factor. Additional challenges to the examination staff are posed by the increased use of new and complex products (including derivatives and certain structured products), the increasing use of technology in operations that facilitate such activities as high-frequency and algorithmic trading, and the growth of complex “families” of financial services companies with integrated operations that include both broker-dealer and investment adviser affiliates. Legislative changes are having a significant impact on the exam program: Additional staffing is needed to continue implementation of various legislative changes. For example, the registration of municipal advisors has added hundreds of additional registrants with increasingly complex business lines under the exam program’s purview. Other provisions in the Dodd-Frank and JOBS Acts, such as those addressing swap participants, swap data repositories, general solicitation, and crowd-funding, will require additional staff resources in FY 2016 in order for OCIE to proactively address these expanded responsibilities.

Independent reviews have highlighted insufficient examination resources and recommended additional funding: In the last several years, several independent bodies have identified inadequate resources as being a significant impediment to exam program effectiveness. For example, an International Monetary Fund (IMF) review of the SEC stated that “lack of sufficient resources currently has a major negative impact on the effectiveness and credibility of the inspection and examination systems of the SEC with regard to IAs.”1_{Likewise, the SEC’s Office of the}

Inspector General stated that “OCIE’s staff resources have not kept pace with the growth in the number of registered investment advisers” and “we strongly encourage OCIE and the Commission to make available the necessary resources to ensure that OCIE is better able to select investment advisers and investment companies for examination and better equipped to conduct comprehensive examinations of these entities.”2_{In addition to these independent reviews, the SEC’s}

Office of the Investor Advocate recently stated in a report to Congress that the “SEC needs additional resources to bolster its examination program.”3_{Further, the Commission’s}

Study on Enhancing Investment Adviser Examinations, 1 _{IMF Country Report No. 10/125 Detailed Assessment of Implementation of the IOSCO Objectives and Principles of Securities Regulation} 2 _{Review of the Commission’s Processes for Selecting Investment Advisers and Investment Companies for Examination, SEC OIG,}

November 19, 2009, Report No.470

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released on January 19, 2011 and conducted pursuant to Section 914 of the Dodd- Frank Act, acknowledged that the “investment adviser examination program faces significant capacity challenges” and “requires a source of funding … that is sufficiently stable to prevent adviser examination resources from periodically being outstripped by growth in the number of registered investment advisers.”

In light of the limited resources currently available to the examination program and the existing challenges, the Office is requesting 225 additional positions, which it intends to use to address the issues identified above, including increasing examination coverage of investment advisers, addressing new responsibilities under the Dodd-Frank and JOBS Acts, and other program improvements.

Examinations of Advisers and Broker-Dealers

In FY 2016, the staff will continue its focus on high risk entities and activities and intends to use additional staffing to, among other things, improve risk assessment and surveillance functions and continue to address the disparity between the number of staff and regulated entities. The staff will address timely developments in the securities markets through targeted, sweep, and cause examinations, and will also implement oversight initiatives related to the Dodd-Frank and JOBS Acts. Of the total staffing request of 225 additional positions for the examinations program, the SEC plans to dedicate 204 additional positions for these activities, as described further below.

Improving overall coverage of registered advisers: The number of registered advisers and their assets under management has grown steadily over the last decade. During the same period of time, staff resources allocated to this program area has not kept pace with the growing responsibilities. This trend has made it more difficult for the program to maintain an effective level of coverage and oversight of its registered advisers. By FY 2016, OCIE estimates that there will be more than 25 advisers per examiner due to growth in the population of advisers. In addition to the growth in the number of firms registered with the SEC, the firms will predominately be larger and more complex than they are now. Without additional resources, it is likely that the coverage level of investment advisers will remain in the range of 10 percent annually. However, if the requested resources become available, then the staff estimates that, once all the requested new positions

are fully hired and trained, adviser coverage should reach 14 percent.

Examinations of never before examined advisers: Due to significant resource limitations, roughly 40 percent of registered advisers have never been examined. Even when excluding the influx of advisers that have registered more recently in the last three years, the percentage of firms never examined is still approximately 20 percent. The staff will utilize additional resources in order to conduct focused, risk-based examinations of a portion of this population of investment advisers.

Examinations of newly registered municipal advisors: The Dodd- Frank Act requires the registration of certain entities who meet the definition of “municipal advisors.” In FY 2016, the SEC estimates that more than 800 entities will be registered as municipal advisors. OCIE will utilize a portion of the additional resources to examine and monitor these new registrants for compliance with recently adopted rules.

Improving overall coverage of investment company complexes: OCIE continues to maintain examination oversight responsibility for more than 800 investment company complexes. These complexes manage more than 10,000 mutual funds and exchange traded funds (ETFs), which hold nearly $16 trillion in investor assets. The examination program will continue efforts to improve coverage of these fund complexes, which will be critically important given their increasing complexity due to factors such as offerings of “alternative” investment strategies; significant growth in certain types of funds, including ETFs; and the relative riskiness of certain funds, including fixed income funds that may be impacted by rising interest rates. Additional focus will also be placed on those investment company complexes that have never before been examined. Monitoring and examining changes impacting retail investors: Financial professionals serving retail investors of all ages are increasingly choosing to operate as an investment adviser or as a dually-registered investment adviser/broker-dealer, rather than solely as a broker-dealer. This migration, which may not be immediately apparent to investors, brings associated changes in the legal and supervisory standards governing conduct, as well as the method and intensity of regulatory oversight. Additionally, registrants are developing and offering to retail investors a variety of new products and services that were formerly characterized as alternative or

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institutional, including private and illiquid investments and structured products intended to generate higher yields in a low interest rate environment. In FY 2016, OCIE will continue to examine the risks to retail investors given the changing environment, with a focus on issues such as fee structures, reverse churning, best execution, and oversight of services offered from remote locations.

Improving coverage of broker-dealer branch offices: Despite the changing landscape, there are still more than 160,000 broker-dealer branch offices. Due to the volume of such offices, the SEC and SROs do not have sufficient resources to examine a material portion of these offices. However, the activities conducted at these remote locations are often significant and present certain risks (as these locations are frequently the main point of contact between broker-dealers and their retail customers). Given these risks, OCIE intends to use a portion of the additional resources requested on targeting and examining higher risk branch offices.

Protecting retirement investors: According to the U.S. Administration on Aging, individuals who are 60 years or older are projected to comprise 25 percent of the U.S. population in 2030. Given the decades long shift of employers offering defined benefit pensions to defined contribution plans, the financial security of these individuals in (or near) retirement is more dependent than ever on their own investments and the services provided by financial advisers. The financial services industry offers a broad array of information, advice, products and services to these investors to help them plan for, and live in, their retirements. In FY 2015 and FY 2016, OCIE will focus resources on examining the risks to retirement investors in areas such as sales practices, suitability, and elder abuse. New procedures and practices to address reforms to securities regulations: OCIE expects to enhance exam procedures and techniques in FY 2016 that are necessary to scrutinize compliance with new, amended, or recently adopted regulatory requirements with respect to private funds, swap dealers, and municipal advisors, among others. For example, offerings under newly adopted Rule 506(c) under the Securities Act of 1933 will present a number of emerging risks and issues. The staff will review general solicitation practices and verification of accredited investor status under the rule; will generally review, monitor, and analyze the use of Rule 506(c); and will evaluate due diligence conducted by

broker-dealers and investment advisers for such offerings. In addition, as regulatory requirements for crowd-funding offerings and entities become effective, the program will need to devote additional resources to this area in order to examine industry developments and compliance with the new rules. Further, the Volcker rule will present unique resource issues for broker-dealer oversight as FINRA examination authority is limited in this space, the subject matter is complex and presents significant safety and soundness issues, and examinations must be coordinated with multiple regulators. Verification of assets and controls at broker-dealers and advisers: A portion of the additional staff requested for FY 2016 will help to continue OCIE’s risk-based practice of verifying the existence and appropriate safeguarding of investor assets managed by advisers and held by broker-dealers. During examinations of advisers, funds, and broker-dealers in FY 2016, staff will also review the processes and controls related to: cyber security practices; wrap fee programs; fees and expenses, particularly in the private equity space; valuation of complex, illiquid assets; and financial controls and the adequacy of net capital of broker-dealer firms. Examinations targeting higher risk entities, including an emphasis on tips, complaints and referrals: In FY 2015 and FY 2016, additional time and resources will be devoted to improving the SEC’s surveillance and risk assessment functions. A variety of projects are currently underway aimed at enhancing information gathering and analysis techniques to transform both quantitative and qualitative information into intelligence that will improve the assignment of limited resources to areas of greatest risk to investors and the markets. OCIE anticipates that improvements in risk assessment and surveillance activities, combined with other initiatives aimed at incentivizing whistleblowers and improving the agency’s tracking and monitoring of tips, complaints, and referrals, will necessitate more time spent on conducting examinations of the relevant entities.

Expanded Large Firm Monitoring Program: Certain large and complex firms pose significant risk to the various markets and to their customers, due to their size, complexity and connectivity with other large firms and financial institutions. These risks are evident in the breadth and complexity of product offerings, the large volume and number of customer transactions generated by such firms, the significant levels of

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firm inventory, and the high concentration of customer assets at the firms. These firms can also potentially pose greater systemic risk as they tend to dominate certain significant capital market activities including the secured funding markets, the tri-party repo market, prime brokerage services, securitizations and other structured product activities. As a result, OCIE is adopting an enhanced, collaborative approach to both monitoring and examining these large firms. Additional resources will be required to focus on areas such as funding and liquidity issues, including stress test models, and sales practice issues associated with derivatives, structured products and securitizations.

Examinations and oversight of certain swap participants: Several sections of the Dodd-Frank Act concern swap market participants. Specifically, pursuant to Title VII of the Dodd-Frank Act, several new categories of persons will be required to register with the Commission, including, among others, security-based swap dealers and major securities-based swap participants, some of which will be located abroad. These persons and/or entities will be subject to examination by the Commission. In order to continue implementation of related Dodd-Frank Act provisions, OCIE is requesting additional positions in FY 2016 to conduct inspections of these newly registered market participants, provide expertise, and coordinate efforts with other regulators.

Examinations of Clearing Agencies, Swap

Data Repositories, and Transfer Agents

Clearing Agencies and Swap Data Repositories: In FY 2016, OCIE will continue to enhance its oversight of clearing agencies given these entities importance to the stability of the market place and consistent with the Dodd-Frank Act. As part of the Dodd-Frank Act, the SEC is directed to conduct examinations, on at least an annual basis, of securities clearing agencies that are designated as “systemically important” and for which it is the supervisory agency. These examinations are conducted in consultation with the Board of Governors of the Federal Reserve System. In addition, the Dodd-Frank Act requires Swap Data Repositories (SDRs) to become registrants and provides examination authority to the SEC for these entities. As a result of these expansions in the SEC’s regulatory responsibilities, both the scope and number of clearing agencies required to be examined by the SEC have grown. Examinations of these entities are complex and time

consuming. They require particular expertise in an evolving area. OCIE is requesting additional positions to adequately fulfill its current obligations to conduct examinations of clearing agencies and to continue communication and coordination efforts with the Federal Reserve and other regulators. In addition, as SDRs become registrants, additional staff will be needed to perform periodic examinations. OCIE requests additional positions for the program to continue to build a dedicated team of derivatives and clearing specialists that will be able to conduct cross-sector examinations of clearing agencies, collaborate and respond to requests for assistance from the Division of Trading and Markets and other regulators engaged in clearance and settlement oversight, and provide clearing and credit default swap/derivatives expertise to OCIE as a whole.

Transfer Agents: OCIE will continue to conduct risk-based, cause, and special examinations of transfer agents, including some joint examinations with Federal banking regulators. The staff will review the services offered by transfer agents that are beyond their traditional transfer agent functions (such as stock plan administration), and review transfer agents’ safeguarding of customer information and custody of shareholder funds (in 2014, transfer agents paid over $1.2 trillion in dividends, interest, and redemptions). In addition, staff will focus on the custody of lost or escheatable securities and funds to prevent shareholder fraud.

Overall, five additional positions are being requested to enhance and expand the oversight of clearing agencies, SDRs, and transfer agents.

Examinations of Exchanges, FINRA,

Security-Based Swap Execution Facilities, and the PCAOB

Exchanges, FINRA, and Security-Based Swap Execution Facilities: Self-regulatory organizations are critical to the SEC’s oversight of the markets. In FY 2016, OCIE will conduct risk-based inspections of national securities exchanges, enhanced reviews of FINRA pursuant to Section 964 of the Dodd-Frank Act, and risk focused exams of FINRA District Offices. OCIE will also continue to follow-up on tips, complaints, and referrals (TCRs) related to the exchanges, including systems compliance TCRs, and will conduct cause exams of exchanges as necessary. Further, security-based swap execution facilities (SB SEFs) that are required to register with the Commission pursuant to the Dodd-Frank Act will be subject to examination in

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FY 2016, assuming that final rules concerning the registration of these entities with the Commission are adopted. Overall, to adequately fulfill current obligations, and in particular to ensure regular oversight of exchanges, FINRA, and SB SEFs, eight additional positions will be devoted to this area.

Public Company Accounting Oversight Board: In the current market environment, the PCAOB has an increasingly critical role in establishing auditing standards for public company audits and for ensuring that audit reports are informative, fair, and independent. The Dodd-Frank Act expanded the PCAOB’s authority to oversee audits of broker-dealers. In FY 2015 and FY 2016, the examination staff will follow up on prior findings and recommendations related to the PCAOB’s inspection program, monitor results of PCAOB inspections of SEC-registered broker-dealers, and continue its ongoing program of conducting periodic examinations of key risk areas at the PCAOB in collaboration with staff from the SEC’s Office of Chief Accountant.

Additional Significant Examination

Program Efforts

In addition to expanding and enhancing the current level of oversight over the entities and activities described above, OCIE also requires additional staffing to continue other significant program-wide efforts, including its Technology Controls Program (TCP), outreach initiatives and specialized working groups as described further below.

Technology Focused Exams: The capital market’s technology has evolved for decades which has increased the complexity, interconnectedness, and speed of transactions, and continues to challenge market participants and regulators. During examinations in FY 2016, OCIE will continue to examine governance and supervision of information technology systems, operational capability, market access, information and cyber security, and preparedness to respond to sudden malfunctions and system outages. OCIE’s Technology Controls Program (TCP) also performs inspections of the automated trading and clearing processes of markets and clearing organizations. In FY 2015 and FY 2016, OCIE, in support of recently adopted Regulation Systems Compliance and Integrity (SCI), will conduct risk targeted exams on governance and supervision of information technology systems, operational capability, market access, information security, data privacy, and preparedness to respond to system disruptions. The TCP inspection function

is also expanding to incorporate alternative trading systems, clearing agencies of security-based swaps, Swap Data Repositories (SDRs), and pre-launch reviews of new exchange applicants or exchanges undergoing ownership changes. OCIE will also seek to enhance cyber security inspections by working with the Department of Treasury, National Security Agency, and the Department of Homeland Security. Five additional positions are requested to further enhance the work of the TCP program. Office of Managing Executive (OME) and Office of Chief Counsel: OCIE’s OME will continue to support the examination program in a number of critical areas during FY 2016, including risk analysis and surveillance, registration, training, human capital, and information technology initiatives. Significantly, the Risk Analysis and Surveillance unit will continue its efforts to improve the risk targeting of firms and activities by helping to monitor and assess risks of all registered entities, including advisers, registered funds, privately offered pooled vehicles, and broker-dealers. Meanwhile, OCIE’s Office of Chief Counsel will continue to provide legal and other interpretative advice to the program while also overseeing the exam program’s internal compliance program. Three additional positions are requested in FY 2016 to support the functions of these groups.

Enterprise Risk Management: OCIE will continue its efforts to meet with senior management and boards of entities registered with the SEC and their affiliates to discuss how each firm identifies and mitigates conflicts of interest and legal, compliance, financial, and operational risks. This initiative is designed to: evaluate firms’ control environment and tone at the top, understand firms’ approach to conflict and risk management, and initiate a dialogue on key risks and regulatory requirements.

Specialized Working Groups: OCIE will continue to develop and implement specialized teams focusing on particular market issues that directly affect investors and the functioning of the markets. These teams will help ensure that the exam program continues to utilize its limited resources in the most efficient and effective manner.

Proactive Industry Compliance Initiatives: In FY 2015 and FY 2016, OCIE and other SEC staff will continue efforts aimed at encouraging stronger industry compliance programs. These efforts include conducting OCIE’s Compliance Outreach program, which provides information and resources for compliance personnel of registered entities, issuing public

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reports and Risk Alerts, and speaking at conferences concerning areas of regulatory interest.

Developing Technology and Data Analytics

As technology continues to evolve and alter the way entities conduct business, it is imperative that the exam program make appropriate investments to keep pace and to more effectively and efficiently conduct its activities. Continued investment in a multi-year technology and analytics plan is critically important to the success of OCIE’s programs. Several of the key initiatives in this area for FY 2016 and beyond are discussed below. Data and Quantitative Analytics: In FY 2015 and FY 2016, OCIE will continue to focus resources on enhancing quantitative and data analytic efforts. Specifically, the program will focus on acquiring and developing tools that will help analyze large amounts of data and generate alerts and exception reports focused on high risk activities and registered entities that require additional follow-up by the staff. These tools also will improve risk assessment and surveillance efforts by providing the staff with a greater ability to monitor for trends and emerging fraud risks, ultimately enabling the staff to allocate SEC resources more effectively. Overall, these capabilities will further expand

WORKLOAD DATA

Activity FY 2014Actual EstimateFY 20151 _RequestFY 20161

Investment Adviser Examinations 1,150 1,225 1,450

Investment Company Examinations (includes administrators) 87 100 110

Market Oversight Inspections 70 50 50

Broker-Dealer Examinations 493 495 500

Transfer Agent Examinations 46 47 50

Clearing Agency Examinations 10 6 7

Municipal Advisor Examinations 7 45 55

Technology Controls Program Inspections 15 20 31

Total FTE 902 964 1,106

1 _{These estimates may be impacted by a number of factors beyond the Office’s control, including, but not limited to, increases in the complexity of firms being examined;} higher than anticipated attrition rates; and the timing and amounts of the resources made available. Further, given the time required to bring on-board new staff after hiring levels are approved, the full effect of FY 2015 and/or FY 2016 positions will not be realized until later years.

and enhance OCIE’s ability to fight and deter potential violations of law, rules, and regulations.

Continued Development of Comprehensive Examination Platform: OCIE will continue to improve and enhance a comprehensive program tracking and examination management system. The system provides examiners with a complete repository of exam related information that allows the staff to conduct exams more effectively and analyze trends across the program.

Improvements to IT Infrastructure: In FY 2016, the exam program will continue to focus on identifying and acquiring additional data sets and information that can be utilized in risk assessment efforts, examinations, and other related initiatives. For example, due to new rules and regulations, a variety of improved and new data sets will be utilized by the program. In addition, technological advances in the industry and within the exam program give the staff the ability to access and process more information and data than ever before. The exam program will work with the Office of Information Technology to develop and maintain an appropriate technological infrastructure for this data, so that it can be easily accessed, analyzed, and disseminated.

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Division of Corporation Finance

(DOLLARS IN THOUSANDS) FY 2014 Actual FY 2015 Estimate FY 2016 Request FTE: Headquarters 457 474 494

Total Costs $ 135,470 $ 144,510 $ 154,838

69 10 385 30

In support of the Commission’s mission to protect investors, maintain fair, orderly, and efficient markets, and facilitate capital formation, the Division of Corporation Finance (CF) seeks to ensure that investors have access to material information in order to make informed investment decisions, both when a company offers its securities to the public and on an ongoing basis as it continues to provide information to the marketplace. CF provides interpretive assistance to companies on SEC rules and forms, by issuing, among other things, staff legal and accounting bulletins, no-action and interpretive letters, compliance and disclosure interpretations, and responses to frequently asked questions and inquiries. CF also makes recommendations to the Commission relating to new rules and revisions to existing rules, including those related to the Dodd-Frank Act and JOBS Act, and an ongoing initiative to develop specific recommendations for updating the disclosure requirements for reporting companies. CF also reviews company filings and provides comments to companies, when appropriate, to assist them in complying with the Commission’s disclosure requirements and to improve disclosure to investors. See further description of CF’s specific business functions described below.

The Division requests seven additional positions in FY 2016 to meet its goals and enhance its role in promoting full, fair, and timely disclosure of information for investors.

Filing Review Activities

In FY 2016, CF will continue its regular and systematic review of reporting companies, and intends to continue to exceed the minimum review requirement of the Sarbanes-Oxley Act of 2002 by continuing to review the reports of companies that comprise a substantial portion of total market capitalization. CF selectively reviews filings, including registration statements, other transactional filings, and ongoing reports made under the Securities Act of 1933 and Securities Exchange Act of 1934 to both monitor and enhance compliance with disclosure and accounting requirements. These filings include those of both new issuers and companies already reporting under the Exchange Act. In conducting disclosure reviews, CF concentrates its review resources on critical disclosures that appear to conflict with Commission rules or applicable accounting standards or that appear to be materially deficient in explanation or clarity.

For FY 2016, CF plans to strengthen its core disclosure review program, and to meet any increased workload resulting from improved market conditions and additional emerging growth companies confidentially submitting registration statements for non-public review as well as the increased workload of the selective review of periodic and current reports and transactional documents they may file.

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Rulemaking and Interpretive Advice

CF recommends new rules, or changes to existing rules, to the Commission where statutorily mandated and to improve investor protection and facilitate capital formation. CF also provides interpretive guidance to companies, investors, and their advisors through issuance of staff legal and accounting bulletins, updates to the Division’s financial reporting manual, no-action and interpretive letters, compliance and disclosure interpretations on the Commission’s Web site, and responses to telephone and e-mail inquiries.

During FY 2016, the Commission will continue to implement rules mandated by the Dodd-Frank and JOBS Acts. As part of this implementation, CF anticipates receiving and responding to interpretive requests related to the adoption and application of these rules. In addition, CF will continue to respond to requests for interpretative guidance by writing letters and posting information on the Commission’s Web site.

In addition to carrying out these core rulemaking and interpretive advice functions, in FY 2016 CF also anticipates continuing its ongoing “Disclosure Effectiveness” initiative to develop specific recommendations for updating and modernizing the disclosure requirements for reporting companies.

WORKLOAD DATA Activity FY 2014 Actual FY 2015 Estimate FY 2016 Request Review

Reporting Company Reviews 4,350 4,350 4,350

Number of New Issuer Reviews

IPO 1933 Act 615 615 615

New 1934 Act 135 135 135

New Issuer Reviews1 ₇₅₀ ₇₅₀ ₇₅₀

Total Reviews 5,100 5,100 5,100

Rulemaking and Interpretive

General Advice and Coordination

No-Action Letters/Interpretive Requests 145 140 140

No-Action Letters (Shareholder Proposals) 300 320 320

Total FTE 457 474 494

1 _{Because of uncertain market and economic conditions, the Division does not project any growth in the level of transactional filings for future periods. Transactional filings} above the projected levels could result in an increase in review time and a reduced number of reviews of reporting companies for the year.

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Division of Trading and Markets

(DOLLARS IN THOUSANDS) FY 2014 Actual FY 2015 Estimate FY 2016 Request FTE: Headquarters 242 256 282

Total Costs $ 74,633 $ 81,149 $ 90,111

135 71 76 0

The mission of the Division of Trading and Markets (TM or Division) is to establish and maintain standards for fair, orderly, and efficient markets, while fostering investor protection and confidence in the markets. In furtherance of this mission, TM is requesting 12 additional positions in FY 2016. These additional resources will enable the Division to continue to assume its substantial new responsibilities under the Dodd-Frank Act and the JOBS Act, as well as to actively participate in international groups that address the regulation of today’s increasingly complex securities markets. In addition, these resources will allow TM to enhance its supervision of securities markets, securities market infrastructure, securities intermediaries, and other market participants.

TM supervises the major participants in the U.S. securities markets, including 18 securities exchanges (equities and options), 87 alternative trading systems (ATSs), nearly 4,500 broker-dealers, 8 active clearing agencies, approximately 450 transfer agents, the Financial Industry Regulatory Authority (FINRA), and securities information processors. The Division also works closely with the Office of Municipal Securities (OMS) to supervise the Municipal Securities Rulemaking Board (MSRB) and municipal advisors.

The scope of these supervisory responsibilities is expected to continue to increase. Since FY 2006, nine new securities exchanges have registered with the SEC, and TM anticipates

up to four additional exchanges to register in FY 2015 and FY 2016. During the next few years, the Division also anticipates up to seven new clearing agencies to register with the Commission, as well as a significant number of new registrants under the Dodd-Frank Act and the JOBS Act once registration requirements established by those laws are implemented. The table below shows these new registrant categories and the expected number of new registrants for each category:

Registrant Category

Number of New Registrants

Expected Security-Based Swap Execution Facilities (SEFs) 20 Security-Based Swap Data Repositories (SDRs) 4 Security-Based Swap Dealers (SBSDs) 50 Major Security-Based Swap Participants (MSBSPs) 5

Crowdfunding Portals 50

Dodd-Frank Act Implementation: In FY 2015, TM is continuing significant efforts to implement key areas of the Dodd-Frank Act, including: (1) creation of a new regulatory structure for over-the-counter (OTC) derivatives; (2) the expanded regulation and examination of clearing agencies, including interagency coordination with respect to those agencies deemed to be systemically significant; and (3) together with OMS, implementation of a new regulatory regime for municipal advisors.

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The Division is responsible for more than thirty separate rulemaking initiatives under the Dodd-Frank Act. Many of these rulemakings are the first step in new ongoing supervisory and regulatory functions for the Division that will extend into FY 2016. These initiatives and functions include:

• Registration and regulation of Swap Execution Facilities (SEFs), SDRs, SBSDs, and Major Security-Based Swap Participants (MSBSPs);

• Regulatory reporting and public dissemination of security-based swap data;

• Mandatory clearing of security-based swaps – the application of security-based swap rules to cross-border activities and persons engaged in those activities; • Expanded regulation and supervision of clearing agencies;

and

• Ongoing implementation of final rules restricting certain proprietary trading activities of broker-dealers under the “Volcker Rule,” including interagency coordination of interpretations, examinations, and enforcement of the rules.

TM further expects that additional responsibilities may arise based on studies conducted under the Dodd-Frank Act – including studies related to the standards applicable to broker-dealers and investment advisers when providing personalized investment advice – as well as the significant implementation and compliance programs that will be required for the rulemaking already underway.

TM is also participating in significant interagency projects mandated by the Dodd-Frank Act, including the designation of systemically important non-bank financial entities and financial market utilities under the auspices of the Financial Stability Oversight Council (FSOC). Also, in conjunction with the Board of Governors of the Federal Reserve (FRB) and the Federal Deposit Insurance Corporation (FDIC), TM will focus on mechanisms for the orderly liquidation of certain large financial companies, including certain large broker-dealers. This coordination is expected to continue into FY 2016 and beyond.

International and Related Initiatives: As the Commission advances its OTC derivatives rules in FY 2015 and FY 2016, TM is participating in international coordination efforts

relating to OTC derivatives, including: (1) leadership roles in the Financial Stability Board (FSB) Working Group on Over-the-Counter (OTC) Derivatives and the International Organization of Securities Commissions (IOSCO) Task Force on OTC Derivatives Regulation, (2) participation in other OTC derivatives groups, including the OTC Derivatives Regulators Group and a group set up by IOSCO and the Basel Committee on Banking Supervision (BCBS) to monitor international standards for margin requirements for non-cleared derivatives, and (3) bilateral discussions with foreign regulators, including negotiating arrangements to share data held in trade repositories.

In addition, as the Commissions OTC derivatives rules are finalized, TM expects to begin to receive applications for substituted compliance from jurisdictions with significant OTC derivatives markets. In order to implement substituted compliance, TM will need to compare U.S. and foreign regimes for OTC derivatives, negotiate memoranda of understanding with foreign regulators, and recommend Commission action through the notice and comment process.

Beyond the international effort related to OTC derivatives reforms, TM continues to represent the SEC on three permanent IOSCO committees responsible for the regulation of secondary markets and intermediaries. Recent areas of focus have included business continuity planning (and cybercrime), the causes of technology-related market disruptions, and how broker-dealers use credit ratings as part of their credit assessments. Through mid-2015, TM will also continue to participate in the Joint Forum, an international organization that addresses issues of common interest to the banking, insurance, and securities financial sectors.

As part of its ongoing duties to regulate the anti-money laundering (AML) and counter-terrorist financing (CTF) obligations of broker-dealers, TM serves on a Treasury-led task force evaluating the government’s AML-CTF regime. TM also continues to represent the SEC in the U.S. delegation to the Financial Action Task Force (FATF), an intergovernmental organization that develops and promotes policies to combat money laundering and terrorist financing. The Division provides technical assistance to the Department of the Treasury, which heads the U.S. delegation to FATF on issues pertaining to the securities industry, including the upcoming evaluation by FATF of U.S.’ AML-CTF efforts.